A discussion thread on BVR’s LinkedIn Group concerns the exposure draft issued by the International Valuation Standards Council (IVSC) on the three principal bases of value contained within the IVS Framework: market value, investment value, and fair value. One commenter notes that there certainly is a “need to determine and clearly describe the appropriate basis of value (standard of value) as well as the step-by-step methodology and metrics utilized in each valuation.” And he gives a recent example about where these different bases can come into play.
Rude awakening: The commenter recently did a valuation for a client to determine his company’s investment value for a proposed buyer. The company didn’t sell, but later the client was getting divorced and his ex-wife wanted a huge amount based on the valuation report. “I told the client not to worry,” he says. He then prepared a valuation report based upon the fair market value standard of value, which was much less than the investment value. Naturally, the ex-wife wasn’t happy. “For all I know, the disgruntled ex-wife, who finally understood the differences, became a valuation analyst.”
Chris Mercer (Mercer Capital), who started the LinkedIn discussion, reminds us to submit comments by March 31 on the exposure draft. Mercer is on the IVSC Professional Board, which issued the exposure draft.
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